Allegations of Alleged Illegal Nominee Shareholding in the News Again

On 6 July, the police in Phuket seized 29 boats and 50 buses of the Tranlee Travel Company, suspected of being an “illegal nominee tour firm for foreigner interests”.  Various Thai laws criminalize so-called nominee shareholding arrangements and it’s not clear from these news reports what laws were alleged to have been violated.  Complicating matters further, most Thai laws that restrict foreign ownership of Thai businesses do not have provisions defining what constitutes an illegal nominee shareholding arrangement.  The one exception is the Foreign Business Act (FBA), but there are uncertainties surrounding even its definition of an illegal nominee.

Allegations of illegal shareholding seem to occur most often in tourism related industries, and its therefore not clear if these charges are arising out of alleged violations of the FBA, the Tour Guide Act, both laws or some other law.  For example, in 2013 the Ministry of Commerce (MOC) alleged that twenty-two firms operating in five tourism provinces – Phuket, Surat Thani, Krabi, Prachup Khiri Khan and Chon Buri – were illegally using Thai nominees to circumvent Thai law restrictions on foreign owernship of various kinds of businesses.

In 2015 the investigations into alleged nominee structures broadened, with the MOC reporting that it had investigated 6,175 firms involved in six sectors – food and beverage, tourism, car rental, property rental and sales, and spa finding claiming 13 firms were suspected of breaching the FBA through the use of nominees.   Also in 2015, the Ministry of Commerce announced its intention to expand its investigation to cover four additional business sectors where it claimed this practice was widespread – handicraft and souvenir retail, internet retailing, direct sales, and education consultants.  In other words, these more recent announcements indicate that investigations into alleged illegal nominee relationships are not limited to just the tourism industry.

But there does seem to be more reports about purported illegal nominee relationships in the tourism industry. Earlier this year, the Prime Minister instructed the Ministry of Commerce, the Ministry of Interior and the Ministry of Tourism and Sports to focus on businesses being illegally operated by foreigners, particularly tour operators and guides.  Police in Phuket were reported to be ready to arrest a number of people in the province for acting as nominees for foreigners, and have shut down five large tour firms in Phuket and Chon Buri in 2016 for being nominees of foreign interests and hiring illegal tour guides.

The one “takeaway” from these news reports is that foreigners operating in the tourism industry should, at the very least, be extra-vigilant about compliance with Thai laws that restrict foreign ownership.  This industry does seem to attract more illegal nominee claims than others – at least as reported in the press.